The sum of discounted costs are subtracted from the sum of discounted benefits. Projects with positive net present value should be considered; the greater the net present value, the more justifiable the project. However, a large project could have a higher net present value than a smaller project, even if it has a lower benefit-cost ratio. This relationship is illustrated in graphs found in the Graphical Representation section.
n+1 = the number of years over which benefits and costs are analyzed
First, discount the costs and benefits in future years.
Σ (Bi/(1+d)i) - Σ (Ci/(1+d)i) summed over i = 0 to n.
Types of Measures >